In China, engineers have worked to create additional usable land for building construction by flattening the ridges of hills and filling in the adjacent valleys. China’s Loess Plateau comprises a type of soil (loess) with a large pore structure that can collapse and become unstable when exposed to groundwater. Conventional valley fill materials include remolded loess or remolded loess treated with cement, lime, gypsum, or other stabilizing additives. These stabilizers are often detrimental to the surrounding environment. Moreover, loess treated with conventional stabilizers exhibits excessive brittleness, which is not suitable for building foundations. Adequate stability of the building foundations in the filled valleys is required to ensure public safety. In this study, we tested 50 remolded loess samples treated with a lignin polymer compound to determine its potential as a valley fill material. Triaxial tests, scanning electron microscopy (SEM), and X-ray diffraction (XRD) were used to study the mechanical characteristics of each sample, determine the effects of the lignin treatment on the loess, and identify the microscopic mechanism affecting shear stress in the lignin-treated loess. The corresponding development of excess pore pressure and volumetric responses under monotonic triaxial testing were also considered. Based on this study’s results, the optimum lignin content in the treated loess samples was 4%; lignin contents exceeding 4% decreased axial stress and increased dilation after saturation. The shear strength and strain-hardening phenomenon of the lignin-treated loess samples increased as the lignin content increased, while the excess pore water pressure decreased. Microscopically, the addition of lignin increased cohesion in the loess samples, while slightly contributing to the internal friction angle. The use of lignin as a stabilizing additive for valley fill material shows potential for controlling building foundation deformation by increasing soil strength and minimizing environmental impacts by maintaining the soil pH and limiting pollutant production.